Adriana Kugler testifies before a Senate Banking Committee hearing on her nomination to be a member of the Federal Reserve Board of Governors, on Capitol Hill in Washington, U.S., June 21, 2023.
Jonathan Ernst | Reuters
Former Federal Reserve Board Gov. Adriana Kugler last year broke the central bank’s rules barring trading of individual stocks and executing financial transactions close to meetings where interest rates are set, actions that led up to her abrupt resignation, according to a report by the U.S. Office of Government Ethics released Saturday.
The report comes three months after Kugler mysteriously left from the Fed’s Board of Governors without giving a reason. Kugler joined the Fed in September 2023 after being appointed by then-President Joe Biden.
Kugler’s resignation came after she requested and was denied a waiver by Chair Jerome Powell on a disclosure form that showed she had impermissible holdings, Fed officials familiar with the matter told CNBC.com.
An official said that concerns related to trading activity by Kugler or her husband date to at least September 2024, when she began working with ethics officials to resolve violations of trading policies.
A financial disclosure report that Kugler filed with the OGE this year on Sept. 11 — which contains details of securities transactions by either her or her husband — notes that an Ethics Office official declined to certify the report.
In a note on Friday’s disclosure, an Ethics official says, “Matters related to this disclosure were referred earlier this year” by the office to the independent Office of Inspector General for the Board of Governors of the Federal Reserve System. An inspector general is an internal ethics watchdog for federal departments and agencies.
Another note on the report says, “Consistent with her September 15, 2024, disclosure, certain trading activity was carried out by Dr. Kugler’s spouse, without Dr. Kugler’s knowledge and she affirms that her spouse did not intend to violate any rules or policies.”
Troubles with trades
Kugler is married to Ignacio Donoso, who is an immigration lawyer.
Her disclosure shows two kinds of violations of Fed rules regarding financial transactions by senior officials at the central bank: purchases of stock shares of individual companies, as opposed to mutual funds; and purchases of securities during so-called “blackout periods” leading up to and after meetings of the Federal Open Market Committee.
The FOMC meetings set key interest rates. Speculation about those meetings and their actual outcome can significantly affect the prices of stocks and bonds.
Kugler’s violations were related to purchases of stock in companies including Apple, Southwest Airlines, Caterpillar and Cava Group, the report indicates.
Kugler participated in FOMC meetings during her tenure at the Fed. But she missed the FOMC’s meeting this past July due to what the Fed had publicly said was a personal matter.
Shortly before the July meeting, Kugler requested a waiver of the Ethics disclosure filing deadline to address the issue of impermissible holdings within her investment portfolio, according to Fed officials who spoke with CNBC.
Two months earlier, she had asked for and received a standard extension for filing annual ethics disclosures, officials said.
Powell, given the repeated efforts to deal with Kugler’s issues, denied her request for another waiver, which led to her not participating in the FOMC meeting in July.
Shortly afterward, on Aug. 1, Kugler announced her intention to resign on Aug. 8
In another disclosure filed in October 2024, Kugler likewise pointed a finger at her husband Donoso for four stock purchases — three of Apple shares in July that year, and one of Cava shares that September — which violated Fed trading rules.
“These four purchases were carried out by my spouse, without my knowledge, and I affirm that my spouse did not intend to violate any rules,” Kugler said at the time.
“Upon learning about the purchases, I immediately notified ethics officials, and at their direction, I initiated divestiture of these assets as soon as possible under FOMC ethics policies.”
CNBC has reached out to Kugler for comment on the new Ethics disclosure report, which also discloses that Kugler received more than $41,000 worth of “pro bono legal services” from the law firm Arnold & Porter.
Pro bono means for free.
CNBC has also requested comment from Donoso.
Rule changes
After she resigned from the Fed, Kugler returned to Georgetown University in Washington, D.C., where she is a professor at the McCourt School of Public Policy and Economics.
In early 2022, the Fed adopted new rules that banned officials from trading in individual stocks and bonds, as well as cryptocurrencies.
That move came after revelations that then-regional Fed presidents Eric Rosengren of Boston and Robert Kaplan of Dallas traded stocks and stock funds shortly before the central bank adopted broad measures to support the U.S. economy during the first weeks of the Covid-19 pandemic.
Rosengren and Kaplan were cleared of any legal wrongdoing, but both of them left their positions amid questions about the propriety of Fed officials possibly using privileged information for financial gain. Other trades from Fed officials, including Powell, also faced scrutiny and drew intense criticism from the public and on Capitol Hill.
Kugler’s surprise resignation allowed President Donald Trump to appoint Stephen Miran to replace her for the remainder of her term on the Fed Board of Governors.
Miran, whose current term ends on Jan. 31, took an unpaid leave of absence as chair of the White House Council of Economic Advisors.
In 2024, the Fed’s inspector general found that Atlanta Fed President Raphael Bostic, who is retiring in February, violated trading rules.
